As doubts about the legality of foreclosure proceedings continue to grow, Treasury secretary Timothy Geithner said a nationwide foreclosure freeze would do more harm than good, Bloomberg reports.

Speaking to PBS's Charlie Rose, Geithner, who called the foreclosure crisis "a national tragedy," said a moratorium could further depress housing prices and said it would be "very damaging to exactly the kind of people we're trying to protect," according to the transcript of his remarks (hat tip to Politico). A nationwide freeze could prevent foreclosed properties from being sold, and, as Geithner noted, unoccupied houses tend to hurt the value of their neighbors.

President Obama's top adviserr David Axelrod has also said he was "not sure" about a national moratorium. Both Axelrod and Geithner warn that such a move could cause collateral damage to valid foreclosure processes. Geithner told Rose "we're not going to make the problem worse."

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

Geithner ... The reason why [recovery]'s slower, Charlie, than we'd like is -- fundamentally goes back to the causes of the crisis. You know, you had a crisis caused by the fact that as an economy we were living way beyond our means. People were borrowing more than they could afford. They were spending more than they earned, and you had this huge growth and leverage in the financial sector. And when you have a recession, a crisis caused by that, it takes more time to dig out of it. And the things that are causing growth to feel slower now, to seem slower, weaker now, are fundamental to the process of healing. We see weakness in it, people are concerned by weakness in it, but it's really about future strength, because as the American people repair their balance sheets, as save more of a share of their income, as they reduce their debt outstanding, that'll make us stronger in the future. In the short term, it means growth is slower than we'd like, but it's fundamentally healthy for us. And we are, in my judgment, Charlie, a substantial way through the process of healing, of fixing the things that were broken, you know, the financial sector much less leveraged, we've had a traumatic huge adjustment in house prices, real estate prices across the country, and private savings rates are already increased quite significantly. So those things are really important for future growth and they're encouraging, but they do mean that we're not growing as fast as we'd like, and I think Washington's got more work to do to try to provide some support for the economy.

Tim Geithner: No, I wouldn't say it that way. I think that you know what you're seeing in housing still now is a national tragedy, still very, very difficult. You know, again, this was a crisis caused by a lot of people were taken advantage of, a lot of people were too optimistic about what they could afford in terms of a house, lot of people were speculating in real estate, and a lot of innocent victims got caught up in the consequences of those basic mistakes. You saw, you know, the nation's largest banks that ran these servicing businesses, not invest anything like what they needed to, to run that business effectively in a downturn like that. And you're seeing the consequences of all those mistakes play out still across the American economy. Now, you've seen some banks suspend temporarily the foreclosure process so they can just make sure that they're not causing any injustice to the borrowers and that's very important for that to happen. And we're going to --

Charlie Rose: So you're pleased to see that happen.

Tim Geithner: I think where that's happening again the suspension is to make sure they're not causing any injustice is very important, but I think it's important to recognize, Charlie, that if you -- a national moratorium would be very damaging to exactly the kind of people we're trying to protect, because the consequence of that would be in neighborhoods that have been most affected by the foreclosure crisis, where you see lots of houses on the block empty, unoccupied, what it means is those communities will be living longer with houses unoccupied, with more pressure on their house price with the people still in their houses. That would be very damaging, and so again we want to make sure we're holding these services accountable, that they're not causing any injustice to people who can afford to stay in their home, and we're going to make sure we're careful in doing that. But we also want to make sure that we're not going to make the problem worse.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

The stated reason is total bunk. But "we know" middle-class voters care about their net equity and the value of their home so let's argue that a foreclosure moratorium would negatively impact property values. And the mechanism by which we argue this happens doesn't matter because in narrative logic all that people will remember is halting foreclosures is bad for property values.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

this is starting to creep out, a bit like the family that leaves the dead relative's room, 'just like he left it', as a shrine.
we wouldn't want house prices to fall harder would we?
so we go dust the old paradigm again.

memo to tim, this bubble's popped, trying to stop it deflating is an expensive exercise in futility.

and so it went, slow recovery, my ass. it's a corporate/banking system recovery, and a disaster for everyone else. high dow, people on food stamps.

there should be oscars for this, it reminds me of greenspan at his oiliest. pacino, de niro, brando got nothing on these guys...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty